NEW YORK Some stainless scrap prices dropped this week amid a cap on consumer mill buying discounts and as London Metal Exchange nickel prices cooled after reaching 15-month highs last week, market participants said.
AMMs broker/processor buying prices for Type 304 solids fell to $1,835 to $1,860 per gross ton May 5 from $1,860 to $1,880 last week, and Type 304 turnings dropping to $1,660 to $1,680 per ton from $1,680 to $1,725 per ton previously.
The LMEs three-month nickel contract closed the official session at $18,525 per tonne ($8.40 per pound), down 0.3 percent from a nearly 15-month high of $18,585 per tonne ($8.43 per pound) April 28. The contract had sagged to as low as $18,070 per tonne May 1 after news that Russian nickel supply wouldnt be affected by White House sanctions resulting from the ongoing political instability in Ukraine (amm.com, April 28).
Processor sources told AMM that lower buying prices for 18/8 material are necessary if they want to "build in a little bit of margin" in the face of consumer buying figures that have been capped by the major North American stainless steel mills.
"With both disappointing mill prices for May and declining LME nickel (prices), stainless prices are slipping back to more realistic levels," one processor source said.
"It feels like the market is in a slight correction mode ... certainly for scrap buying," a second processor source said. "Youve got to buy scrap against a price where you can turn around and make a profit, if you want to be around for the long haul."
The second processor noted that the mills cant expand their pricing structure. "They cant pay more for scrap vs. the LME and survive. Theyre bleeding as it is. Higher prices are not going to help their bottom line."
In the wake of escalating scrap prices, some major processors have taken to importing material from Europe in the hope of adding supply into a market that in recent months has been characterized by strong mill demand.
"If (mills) keep melting at the pace theyre melting, its going to get to the point where theres not going to be enough scrap in North America," a third processor source told AMM.